Glossary

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Capital Appreciation Fund

An investment fund that seeks growth in share prices by investing primarily in stocks whose share prices are expected to rise.

Capital Gain

An increase in the value of an investment, calculated by the difference between the net purchase price and the net sale price.

Capital Loss

The loss in the value of an investment, calculated by the difference between the purchase price and the net sale price.

Capital Preservation

An investment goal or objective to keep the original investment amount (the principal) from decreasing in value.

Capitalization (Cap)

The total market value of a company’s outstanding equity.

Cash Alternative or Cash Equivalent

An investment that is short term, highly liquid, and has high credit quality.

Collective Investment Fund

Investments created by a bank or trust company for employee benefit plans, such as 401(k) plans, that pool the assets of retirement plans for investment purposes. They are governed by rules and regulations that apply to banks and trust companies instead of being registered with the SEC. These funds are also referred to as collective or commingled trusts.

Commission

Compensation paid to a broker or other salesperson for his or her role when investments are bought or sold.

Common Stock

An investment that represents a share of ownership in a corporation.

Company Stock Fund

A fund that invests primarily in employer securities that may also maintain a cash position for liquidity purposes.

Competing Funds

An investment fund that is identified by the investment manager of another fund and which is subject to special rules relating to an investor’s ability to buy and sell investments between the two funds. See Equity Wash Restriction.

Compounding

The cumulative effect that reinvesting an investment’s earnings can have by generating additional earnings of their own.

Conservative

An investment approach that accepts lower rewards in return for potentially lower risks.

Contingent Deferred Sales Charge (CDSC)

A fee imposed when shares of a mutual fund or a variable annuity contract are redeemed (sold) during the first few years of ownership. Also called a back-end load.

Corporate Bond

A bond issued by a corporation, rather than by a government. The credit risk for a corporate bond is based on the re-payment ability of the company that issued the bond.

Credit Risk

The risk that a bond issuer will default, meaning not repay principal or interest to the investor as promised. Credit risk is also known as “default risk.”

Current Yield

The current rate of return of an investment calculated by dividing its expected income payments by its current market price.

Custodian

A person or entity (e.g., bank, trust company, or other organization) responsible for holding financial assets.